I mean, actually the biggest problem the US faces right now is that the US companies have made some huge profits but aren't reinvesting that. While it's fun to just blame the big faceless corporations, a better question is... wh

Uncertanity to make a profit/uncertantity about costs of obama's healthcare plan/uncertanity of their tax rates.

Plenty of money is sitting out of the economy because of this.

To use a simple example. Say you own a shoe making company, and the government puts in a stimulus for shoes. Are you going to reinvest that money in your buisness, knowing that shoe demand is based soley on goverment spending that can't keep up for every, that soon you'll have to pay an indeterminate amount extra per employee, that your bank may have to keep more money on hand, therefore woudln't even give you a loan right now if you asked?

For the US, there is no real answer but time, for stuff like the Obama healthcare law to either go it's course and it's price be known, or for it to just disappear.

Really, that's the only answer for most financial problems but whatever. (With deficit spending only existing in times of trouble to provide for those in need, not companies that aren't going to reinvest until all the uncertainty is gone anyway.)

That's why the US "recovery" has essentially been a jobless one with little to no help to the average person.

You do realize you've completely changed your arguement here right?

Your original arguement was the buffet rule needs to exist to bring the country into a surplus.  I've explained how such a rule may actually cause the opposite to be true, after which you've made a moral arguement against it... essentially conceding that such a rule would be harmful to the economy as constructed, but just would like it because it would be more moral in your view.

Do I find it moral that somebody pays less taxes for buying and selling shares in companies then working at the same companies?   No.  Do I think it helps the economy by spurring investments... from pretty much everybody?   Yes.

Do I think said investments in turn end up enhancing everbodys lives including those who pay more taxes on a middling income?   Also yes.

Do I think it's moral to do something to make things more "fair" yet hurt everyones lives?  No, don't really find that moral either.

Kinda seems like a rewrite is needed that would exempt your riskier investments.  By say giving cheaper tax rates or even to IPOs and stocks under 2 years of age when purchased, while loweirng IPO restrictions.

What Greece has (and had) though, is the smallest private debt in the eurozone, and more than 200bn Euros in real bank deposits. And it's economics 101, public debt is much easier to solve than private one.

Now we're pidgeonholed into a stupid austerity package that will ultimately lead us to default. While also dropping our GDP and other figures to other Balcan countries' levels.

It's highly probable yeah... slight chance of it not happening.

Though I mean, the other option was to immediatly lead to default while dropping your GDP and other figures to Balkan level, if not lower.

There really wasn't a third option.  Which in general is a problem for the modern public.  The lie that there is always a "good option".

Sometimes your choices are between a punch in the face or a kick in the balls, and that's it.

Eventually if you miss enough warning signs and keep making the wrong desicisons, your fucked short term no matter what you do.

Not sure why you think private debt is more a of a probem then public debt though.  Private debt can be solved through bankruptcies, public debt... can't really be solved.

I believe there are moral and economic arguments for the Buffett tax. The fact is that increased taxation on investment has not been shown to significantly decrease investment and the idea that low taxes on investment spurs the economy doesn't have a whole lot of proof behind it. At the same time it's morally repugnant.

No. Uncertainty of demand, difficulty of obtaining finance, and increased risk of financial distress are the main reasons why they are holding cash.

Even if we were to accept fear of taxes as a reason, they're not as huge as the three reasons I've listed.

Enough with the conspiracies.

You seem to be the one with the conspiracies.

Why is it difficult to obtain finance when banks are having huge comebeacks and rapid profits?

Uncertainty of demand... that sounds a lot like uncertaitnty of profit to me?  Which you know, is the focal point against stimulus, government stimulus isn't real demand, so instead it just cloggs up the money into buisnesses that hold on to it for real demand?

Increased risk of financial distress... so... what's the point of the stimulus again... if all this money is just going to end up in buisnesses hands that won't spend it.

1) Because demand is uncertain and the economy is depressed? Demand uncertainity = Cash flow uncertainity.

2) I really don't see your point. We can disagree what the government should do when there's uncertainity of demand, but the point is that people are less willing to spend and now firms have to deleverage because cash flows are uncertain.

3) I mean, you have to take financial theory with a grain of salt, but firms don't just horde cash for the sake of hording cash. If you gave a firm a trillion dollars, hypothetically, they aren't just going to horde it all. They'll probably distribute a lot of it as dividends or repurchase shares. So no, firms aren't going to hold infinite amounts of money. Firms are deleveraging though, because, like I said, there's higher uncertainity in demand, and because getting external financing is more expensive.

It might not be as simple and feel good as "it's big bad government's fault", but the reality is simple. Firms are deleveraging because it's more expensive to borrow money and it's more risky to have debt in the current economic environment.

From my professor's lecture slides:

•In a perfect capital market, firms have few reasons to preserve cash since external financing can always be obtained at a fair price

•In the presence of imperfections:
~Firms may maintain excess cash as a precaution against the possibility of future negative shocks or liquidity constraints
~Example: Recent financial crisis
–Commercial paper markets dried up, lenders were worried about counterparties defaulting
–Many firms were not able to access credit markets

•What is a liquidity shock?
•With a large liquidity shock, the borrower may not be able to obtain funds (at least not at reasonable rates)
•What are some benefits and costs of liquidity?

•Benefit: Avoid Issuance Cost
~Don’t have to access external capital markets
~Avoid transaction and asymmetric information costs
–In times of need, asymmetric information problem is probably more severe

•Benefit: Ability to invest even when external markets are too costly
~If earnings are not likely to be enough to fund future positive-NPV investment opportunities, the firm might accumulate a large cash balance
~Allows firms to seize opportunities when their competition is capital constrained

•Benefit: Avoid Financial Distress Costs
~If firm’s operations do not generate sufficient cash flow to service debt, liquidity reduces likelihood of incurring financial distress costs

•Cost: Agency Cost (this should look familiar)
~Free Cash Flow problem
–Executive perks, over-paying for acquisitions, etc.
~Paying out cash and issuing debt can decrease the FCF problem

•Cost: Taxes and Cash Retention
~Corporate taxes make it costly for a firm to retain excess cash
~Cash=Negative Debt (mostly)
–Firms earn interest on cash equivalents
–This is like a negative interest tax shield
~Double taxation on firm’s cash:
–Corporate tax and capital gains tax on interest earned
–Firm pays tax on the interest earned that is added to the value of the firm, which is taxed again when investors receive payouts.

There you go. This isn't a fucking a socialist professor, but a business school professor that fucking uses Atlas Shrugged references in almost every exam/sample problem. If corporations expect taxes to increase, then they will leverage, since it's more costly to hold on to cash (and it's more valuable to hold debt, to take advantage of tax shields).

1) So, you can't get a loan because of the situations I mentioned, thereofre you can't get a loan, and the problem is you can't get a loan.   Companies would be willing to invest a bit if they had any idea what to expect next year.

Nevermind the Voelkler rule which by law is going to force way more cash reserves.

2)  Well first, your central arguement is that governments need to spend to create growth, yet you are argueing growth isn't occuring because of uncertainty in the face of government spending.  Your arguement here completely defeats your overlying premise above.

3) Economic theories, much like scientific theories eventually have to fall to the wayside when in contradicts the observable facts.  In general there is a HUGE gap between educational economists and practical economists.  Educational economists tend to ask the "wrong" questions.